SDNY Court Statement in the Google matter. 2.18.10

by Lynn Chu

My court statement. The strictly enforced time limit was up 1/3 of the way through, alas, but I feel the main thrust of what I meant to do was accomplished for now. A good set up (imho) from an industry professional to the absolutely rockin' DOJ presentation by William Cavanaugh.

This is a bad deal.

I know bad deals because I’m a professional dealmaker. I’m a literary agent with corporate, entertainment, securities and executive comp law background, and over 30 years in publishing. This is a complex corporate matter, concerning a digital industry the authors’ reps weren’t up to. They fundamentally have no agency authority by virtue of this litigation to “deal” in the rights, interests, and properties of others. These are business affairs that only individuals can judge, for themselves.

Authors have gotten the short end of the stick in a 3-way negotiation between the publishing cartel and the richest company in the world, who, in litigation, alas, has every right to fight as dog eat dog as it can—and obviously has.

This is a terrible contract of adhesion that, as a professional, you instantly tell any client to run like the wind from. Massive costs and liabilities are handed to owners, that only the publisher should bear. Had Google not been sued and just said, come turn on your scan here, would have been a thousand times easier, cheaper, fairer, and more efficient, than this apparatus. Individuals would have, using their hive mind, done the work of making Google be fair in the contract, themselves.

The parties are well aware that what they are doing is legislative. Because they’ve been quoted (in the Wall St. Journal) saying they were just bored waiting around for Congress to switch out dumb old copyright law that doesn’t serve Silicon Valley. Getting permission, they say, is inconvenient to online publishers. Let’s do the opposite, make owners pay for everything, and manipulate a court into legislating it.

A Registry may not stand in the stead of all owners. This does nothing but create enormous costs that now, all owners have to pay for. It aggregates and monetizes their data (with what privacy protection, who knows). It breaks the connection between Google and owners to overwrite the protections of the common law that curb predatory corporate behavior. Google should be contracting direct. That way, contracts will in fact BE fair, because owners know their own interests and will make sure of it, or walk. This is not fair.

It goes without saying that this is price fixing. It’s a massive market distortion. It is the product of collusion between the book publisher cartel, and Google—a monopoly handing off to a monopsony—within this litigation. Publishers saw Google as their savior from the big enemy of the moment, Amazon. So they fled to Google’s embrace, knowing they could extract goodies Google’d never miss, because it was all going to come out of the authors.

The Registry is a nonterminable, unappointed corporate special purpose entity whose sole purpose is busywork that need not exist. To cost Google’s contracts and claims department to rights owners is a terrible deal. To approve this would only send a message to all corporations, go ahead, be unethical, cram any nasty legerdemain down unsophisticated people’s throats as you like. If they sign it, they eat it. We the court will even sign it for them.

There is just no such thing as a publishing license, which this is, that waives and releases, as Article X does, all copyright, trademark and droit moral past, present, and future against the publisher, no matter what the use of one’s work. Well surely there may be some—as I said, overreaching contracts of adhesion are springing up like daisies everywhere now, preying on the desperate. But even the desperate generally only sign for significant up-front cash, and a well informed hunch that, for themselves (as with academics who really don’t care), the paper is totally nugatory. This is a zero advance display rights deal that covertly steals a host of other valuable rights in the work and dumps a load of unforeseeable risk and liability upon you as well.

Do not mistake class action settlement negotiation for a free market transaction. This transaction isn’t even adversarial. They certified to settle. IMHO it is completely collusive. The Authors’ Guild told me they relied on the publishers’ counsel, Jeffrey Cunard of Debevoise, to negotiate the document. I don’t think they know—or want to know—how badly they’ve been rolled, and here the issue is the book publishers, and old language many have snuck into old contracts and want to ram down authors’ throats, by using this Registry as their costly paper discovery, line-parsing, equity-destroying cats’ paw. Authors Guild just bobbed along like a cork in the surf of a nice, classy, seemingly cooperative enterprise here. Heady with the illusion of power and looking forward to the new fiefdom.

Litigation waivers and releases don’t belong rolled up into a business deal—voiding all one’s rights in one’s property, with no right to notice, accounting or pay based on Google’s use of your work, ever again, no matter how lucrative. Or any library’s!—I have yet to figure out how libraries’ infringements weren’t joined here, and how all owners’ copyright claims against them get to be wiped out in this too, or whether approval would mean that now, libraries can go around selling off their collections for scanning to anyone they like.

It is per se ridiculous to provide that, after April 5, 2011, you can’t delete your works from the scan set. How is this fair? Why should the works of everyone be used by Google forever unrestricted, to generate hit and view data, and in any and all products and services, for no pay and no credit? And why am I not entitled to know all my own hit and view data, on a regular basis, while I do reside on Google’s scan set? Everything becomes Google’s trade secret in this, dumping all owner accounting. Why can’t the scans be replevined for larceny and made available on a fair and equitable basis to all online publishers who want to compete for owner business—with all aggregate data made available to the public transparently through the Bureau of Labor Statistics (or some such equivalent government monitor of public data)?

Settlement has to be limited to Google’s past infringing acts of scanning—in exchange, not for meaningless up front cash, which just buys off aggregators and serves to crank up the fattest attorneys fees—but real, true substantive fairness and simplicity in the contract with the public. Individuals can set their own rates and terms. This document tramples people’s rights and future legal claims which have nothing to do with this case. It bars authors from federal court, and they are going to need to vindicate their ownership of online rights they never granted, against a book publisher who is taking their Google money now claiming this extends their license into eternity, under a now self-obliterating out of print clause. It strips authors of all the protection of ordinary rules of evidence and equitable common law principles of contract construction—which §6.4 of Attachment A totally wipes out. This is all grossly unfair and unreasonable.

The publisher cartel intend this document to destroy the common law of publishing that says the out of print clause may not be ditched. They want 35%-50% to be a fixed “legal” rate on passive common carrier digital, and for it to be “law” that authors are to be relegated to a back-end net. The true economic value for display rights might be more like VISA fees—2%, after competition and market equilibrium over time. (And even VISA comes with full monthly accounting—which this doesn’t.) Publishing law is a body of doctrine with a long, wise, colorful history based on simple, durable, robust and above all fair rules of law. The wisdom of the common law should not be trashed by this exercise in “private lawmaking.”

Publishing contracts are personal, they are partnerships, and they are built on fiduciary relationships of trust. In short, they are individual—not “deemed” or to be imposed on autopilot. There is nothing routine or typical about a literary work, or its deal.

• This is a structural injunction—but imposed on owners! Not the malfeasor!

• Permissions-getting by publishers is not a social crisis. It is cheap and easy. Congress has failed to pass orphan legislation for good reason.

There is a ton of unpaid for value conveyed to Google by this:

• All nondisplay rights. There’s no notice or permission or fees for any new uses in this and no Registry power to get any either, because owners now have no power under Article X. Online is potentially the most valuable set of rights in a work in history, and they’re running off with them. This is just the classic overreaching entertainment contract scam. Publishers had no interest in nondisplay rights; and the authors’ representatives had no competence to see the scam.

• Art VIII. Low ($15M) Google and library ($3M) liability caps for all future damages for any kind of tort, ie, hacking, which might cause total loss of owner value. Owners totally waive both Google and library negligence. This is a horror. Any and all owner claims against Google may be collectivized by Registry fiat, and diluted among anyone deemed similar. That means all risks of all future Google or library use of a work shifts to owners! No contract is far preferable for owners. This disposes of all owner legal interests, whether related to copyright or not, willy nilly.

• Art VII. Owners assume most of the costs (since Google’s liability is capped) of elaborate “security,” which amounts to meaningless paperwork—except all this is a snowscreen for making libraries spy on users and gather their Research Agendas, so Google can get a bead on the competition.

• Google is giving copies of the scans to libraries. Why? This just makes hacking totally likely. Shouldn’t Google just furnish access to libraries on their servers? (Answer: hacking will then be less blamable on only Google; plenty of libraries may be to blame. This engineers still more shifts of liability away from the malfeasor.)

• They want this court—you!—to be administering this set-up even 10 years from now.

• For Google to have to run its publishing business on this rigid rulebook doesn’t even help it. Individual contracting is far easier and more flexible and cost free. Google has the right to cut and run (see §3.7). And they may want to, under this rigid contract regime.

• §3.7 is just as bad as the §3.8 MFN. The Registry has to use this same agmt as their license of any other online publisher. Hence, price fixing again, forever into the future. I don’t get it. Has the Registry no negotiation skills? What use are they?

Conclusion Rules of common law and copyright, contract, agency, partnership, and property, are simple, flexible, durable and robust. Individual contracting is inherently competitive and has market integrity and protects privacy. This does not.